Peter Hambro, one of the leading figures in Britain’s gold mining
sector, has criticised hedge funds for distorting the market for gold and
warned that there is potential for “disaster” in the industry. – telegraph.co.uk
From Tana Springpad
Notes | the gold price, fixed at $1,376.12 per troy ounce in London on
Friday, has fallen more than 30pc from a 2011 peak of more than $1,900. Figures
from the World Gold Council last week showed that ownership of the world’s gold
shifted further East during the first half of 2013. Overall demand for gold was
12pc lower in the three months to the end of June than in the comparable period
for 2012, as Westerners dumped their exchange-traded holdings and Asian
consumers responded to lower prices by adding to their hoards of jewellery and
bullion. “It’s rather odd,” said Mr
Hambro, “Gold is streaming into the Far East. Russians are still buying; the
Chinese are buying. There’s no secret. It’s in the international statistics.
Related Gold Article:
“Where the selling came from that knocked the gold price
down, I really don’t know. It was such a very strange thing. “I’ve been in the
gold business for 35 years and never known a big change like that where it
wasn’t obvious where it came from.” Asked whether he is concerned that hedge
funds are distorting the market, he said: “The quantity of gold available for
delivery on the Commodities Exchange in New York is at its lowest level ever. “The
size of the contracts is at its highest, but the deliverable is at its lowest.
There is the potential for disaster in those numbers.”
“Fractional reserve banking in gold is responsible for a lot
of the strange things going on. You can set yourself up as a hedge fund and
nobody knows who you are. “Because of these strange machinations and the
distortion between the physical market and the paper market, it’s very hard to
say what’s going to happen. “There’s a real risk that the people who’ve sold
'paper gold’ won’t be able to deliver and there will be some official ruling
that will settle all the bargains at today’s price. Something like that will
happen.” Petropavlovsk, set up as Peter Hambro Mining in 1994, is now the
second-largest producer of gold in Russia, the world’s fourth-biggest producer.
Before the gold price slumped again earlier this year, the company locked in
half its production for just over a year at $1,640 an ounce and is now hedged
against gold price movements until next July.
The company is in the midst of a major cost-cutting
programme aimed at reducing the $1.2bn of net debt it had in March to less than
$1bn by the year-end. Petropavlovsk shares have fallen by 75pc over the past
six months, while the company is the most shorted stock in the FTSE All-share
index. The shares closed up 22pc at 119.5p on Friday, valuing Petropavlovsk at
£223m. Mr Hambro has a 4.62pc stake.
“We put 15 kilograms of gold ore and water into each ball, and we use 100 grams of mercury per ball,” or 3.5 ounces for 33 pounds of ore, said David, who runs the family’s workshop. Workers then purify the nuggets using an open flame, burning off the mercury in sites among residential areas throughout the village.
ReplyDeleteYuyun Ismawati, an environmental campaigner based in Britain, says the scope of the problem is evident in the amount of mercury being exported from around the world to Indonesia, her home country. Most of it, she says, is brought in illegally.
According to the Indonesian Ministry of Trade, the country imported slightly less than one metric ton of mercury in 2012 through two local companies, primarily for commercial manufacturing, including the production of light bulbs and batteries, and for use in hospital equipment. According to United Nations trade statistics, however, 368 metric tons of mercury, about 810,000 pounds, were legally exported to Indonesia in 2012 from countries that included Singapore, the United States, Japan and Thailand.